Consob published the study entitled "Customer profiling for the purposes of suitability assessment. Follow up to the 2012 study on a sample of Italian intermediaries" in the  Discussion Paper series.

The work continues and extends the analysis published in a previous Discussion Paper in 2012, using the same methodological approach, with reference to the formats used for suitability assessments by a sample of 22 Italian banks representing about half of the assets managed on behalf of retail customers as at 31 March 2022.

The examination takes into account the specifications contained in the reference legislation and the ESMA guidelines of 2018 and 2022 on suitability assessments and on good practices relating to the structuring and administration of questionnaires, which can be inferred from disciplines such as statistics, psychometrics and behavioural finance.

The work also extends the scope of the 2012 study by analysing investor profiling algorithms. In particular, we examined the rules on exploiting and aggregating of the information collected through the questionnaires as well as the procedures for attributing, and subsequently updating over time, a specific profile to a customer.

Finally, the study illustrates the regulatory innovations related to collecting data on customers' sustainability preferences as referred to in Delegated Regulation (EU) 2021/1253 and offers a survey of the suggestions found in the literature on the subject.

The evidence collected allows us to conclude that, compared with 2012, the quality of the data collection tools used by banks for suitability assessments is on average higher, in terms of both completeness of content and the clarity of the language and terms used. In addition to this, the questionnaires were easier to read and understand.

With regard to the algorithms used to attribute profiles to customers, it has been noted (also as a result of Consob's supervisory activity) that there is an increasing focus on the use of metrics that reduce the risk of banks using profiles in an opportunistic way that does not reflect the actual characteristics of customers.

Without prejudice to this solid ground, however, there is still room for improvement, relating both to the structure of the questionnaires and to the algorithms used for profiling. With regard to the first aspect, it should be noted, among other things, that information on financial knowledge continues to be gathered using self-assessment questionnaires.

With reference to the second aspect, attention is drawn to the assignment of scores not adequately differentiated by type of question and relevance of the variable to be investigated; failure to make proper use of certain information collected during the administration of the questionnaire; and the extent of the internal consistency checks on the information collected and the verifications with respect to the broader information set available to the bank.

In this context, specific supervisory initiatives were launched by Consob with reference to the customer profiling procedures adopted by the subjects in the sample with a view to ensuring greater convergence towards market best practices.

The study contains interesting recommendations for the definition of the contents of financial education initiatives, in particular, for the formats dedicated to the investment process and the relationship between the investor and the financial advisor, in which the importance of the information exchange between customer and bank is highlighted, as well as the profiles the retail investor must devote attention to in order to increase the effectiveness of the suitability assessment, that is, one of the main measures that the law places in its protection. In this context, by favouring investment choices aligned with the investor profile, suitability assessments also help increase confidence in market operators.